Correlation Between FARO Technologies and BP Plc
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and BP Plc at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FARO Technologies and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and BP plc, you can compare the effects of market volatilities on FARO Technologies and BP Plc and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FARO Technologies with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and BP Plc.
Diversification Opportunities for FARO Technologies and BP Plc
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FARO and BSU is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and FARO Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FARO Technologies are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of FARO Technologies i.e., FARO Technologies and BP Plc go up and down completely randomly.
Pair Corralation between FARO Technologies and BP Plc
Assuming the 90 days horizon FARO Technologies is expected to generate 2.57 times more return on investment than BP Plc. However, FARO Technologies is 2.57 times more volatile than BP plc. It trades about 0.03 of its potential returns per unit of risk. BP plc is currently generating about 0.01 per unit of risk. If you would invest 2,264 in FARO Technologies on December 4, 2024 and sell it today you would earn a total of 656.00 from holding FARO Technologies or generate 28.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. BP plc
Performance |
| Timeline |
| FARO Technologies |
| BP plc |
FARO Technologies and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and BP Plc
The main advantage of trading using opposite FARO Technologies and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, BP Plc can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BP Plc will offset losses from the drop in BP Plc's long position.| FARO Technologies vs. EMPEROR ENT HOTEL | FARO Technologies vs. Dalata Hotel Group | FARO Technologies vs. FORTRESS BIOTECHPRFA 25 | FARO Technologies vs. Playa Hotels Resorts |
| BP Plc vs. Peijia Medical Limited | BP Plc vs. CREO MEDICAL GRP | BP Plc vs. Sims Metal Management | BP Plc vs. IMAGIN MEDICAL INC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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